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Why Having a Trade License is Important?

Narendra Kumar

| Updated: Mar 10, 2018 | Category: Trade License

Obtain Trade License

A License issued or permission granted by the municipal corporation permitting to carry on a particular trade on a particular address. It is often a time consuming and expensive process as it may be the case that setting up a single business requires multiple types of licenses, depending upon the type of business ownership, activities in which the business is dealing, the number of employees, etc. Localized licenses are often required in different geographical units with respect to the various taxes imposed on such units. The license must be obtained by the authority before starting manufacturing, exchange or storage of any activity/commodity.

It is a means to ensure that the manner and locality in which the business is being carried on is according to the relevant rules, standards and safety guidelines.

The Necessity of Obtaining Trade License

Registration of business is different from obtaining Trade License. Trade license is the permission that one needs to get from the government to begin a business.  In this blog, I have discussed the process to obtain a trade license. It is a method to regulate the trade and to ensure compliance with rule and safety guidelines issued by the government and to protect the interest of the public at large against the health hazard and inconvenience which a business may cause.

The government has made it necessary for one to obtain trade license to ensure that one is not carrying out unethical business practices and is following relevant rules, safety measures and guidelines. The trade license was made compulsory to ensure that the government can regulate various trade activities in the country.   The main object of getting a trade license is to control business locations by way of putting constraints on people from running certain types of businesses from their home to maintain a separate business environment.

It controls the number of specific responsibilities of the entrepreneur in connection with his business.

How to Obtain Trade License?

Obtaining a trade license is very simple. However, the procedure varies from state to state. The applicant is required to submit the application to the concerned authority (Municipal Corporation). The application is processed within 7-10 days in metro cities. In other smaller cities and rural areas, it takes longer.Once a license is issued by the authority it has to be renewed periodically to ensure that the business is being carried out in accordance with local laws.

Note- *In some states it is mandatory to apply for the trade license 3 months prior to the commencement of any business activity.

Categories for which trade license is required

Category Activity
Type A Activities related to consumable items and eating points
Type B Trades which makes use of locomotive power in order to function, such as industries, workshops, flour mills etc.
Type C A trade involving dangerous activities.

Eligibility for getting a trade license

  • A person must possess minimum age of (18 years)
  • No criminal records
  • Business must be capable of executing legal work.

Key points to be kept in mind

  • Application to make before starting the business.
  • Renewal must be filled within 30 working days before the expiry of the license.
  • Once the license issued and it has to be maintained on an annual basis.

Details required for licensing

Details of business or service center and  the owner (Utility Bill, Rent agreement, Fire department NOC)

*In case premise is managed by a person other than owner then ID & Address proof of such person is required.

Business or service center address(where the post can be mailed) and other documents as may be required.

Municipal tax receipts.

Pan card of the company.

Importance of Trade License

  • A licensed business, in whatever form you choose to incorporate the business, provides prestige and an aura of stability to your business that will be attractive to customers and investors.
  • A licensed business protects its owners against certain types of liability. If damage or injury occurs the business actions or doings, the personal finances would not be at stake in any settlement. Note that the various types of licenses offer different levels of protection.
  • A licensed business may provide you with access to certain groups that would s unable to join or participate in if the person operates in his/her personal name. Companies having better business practices, investment groups and other business-oriented organizations may not permit to access the information if the company is not having a trade
  • The government has made it necessary for one to get a trade license to ensure that one is not carrying out unethical business practices and is following all the safety measures and guidelines.
  • With a view to discourage any illegal activity and ensure the maintenance of the environment and to ensure that no industrial or manufacturing related activities are conducted in any residential area.
Narendra Kumar

Experienced Finance and Legal Professional with 12+ Years of Experience in Legal, Finance, Fintech, Blockchain, and Revenue Management.

Business Plan Consultant


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